Micronesia in Review: Issues and Events, I July I994 to I July I995 Reviews of Kiribati and Nauru are not Belau's Independence Day celebra­ included in this issue. tion was the grandest the republic has ever hosted. Commemorative coins were cast, a declaration of indepen­ BELAU dence was written and signed, a huge The achievement of sovereignty with feast and entertainment were offered, the implementation of the Compact of and dignitaries from some twenty­ Free Association, membership in the three foreign countries and a half United Nations, decisions on compact dozen UN agencies and other major funds, the establishment of external groups attended the formalities and relations, and the foreign worker issue festivities. In his independence day were the main developments in Belau address, President Nakamura empha­ in I994-95. sized the economic challenges Belau For several reasons, the choice of will face: I October I994 to implement the com­ We must now focus on building self-suf­ pact and the accompanying assertion ficiency which is an essential component of independence by Belau was a good of sovereignty. Our public and private one. Most important, money is cultur­ sectors must work together to develop ally very significant in Belau, and the appropriate laws and regulations which compact provides for substantial pay­ strengthen our economy. Compact fund­ ments in the early years. For fiscal year ing is limited and must be used and I994~5, which started on I October, invested wisely to meet our nation's the transfer amounted to some $I90 long-term goals. Responsible economic million, or more than $IOOO per cap­ planning and management will also ita. The leadership of Belau debated result in continued respect and assis­ tance from international organizations. how best to describe I October. While Belau's private newspaper declared Another proud moment for the sov­ "Palau is Free" on its front page, other ereign nation of Belau was its entry individuals claimed that "Compact into the United Nations as the organi­ Day," "Free Association Day," or zation's I85th member. President "Sovereignty Day" would be equally Nakamura and an entourage of tradi­ fitting. President Nakamura settled the tional and elected leaders participated issue by officially declaring I October in a special flag-raising ceremony with "Independence Day," a new national UN Secretary General Bhoutros holiday. The establishment of free Bhoutros-Ghali. The president association marked the end of over a addressed the General Assembly, century of colonial rule by Spain, Ger­ which voted on I5 December I994 to many, Japan, and the United States and admit Belau to full membership in the reestablished Belau's sovereignty. world body. Recognizing the impor- POLITICAL REVIEWS' MICRONESIA 157 tant role the United Nations had Trust Company of the Bank of Hawai'i played in Belau's development since to serve as custodians of the funds. 1947, President Nakamura stated in These arrangements were endorsed by his address that he wished to "offer the Belau National Congress. In his sincere thanks to all the members of 1995 state of the republic speech, Pres­ the United Nations, particularly the ident Nakamura indicated that the members of the Trusteeship Council. trust fund amount of $66 million was Today we can celebrate a victory for invested in long-term, low risk securi­ the principle of self-determination and ties. The capital improvement monies the idea that stronger nations can help totaling about $52 million have been others overcome devastation and invested at an optimal return rate, and destruction to recover their nation­ a drawdown schedule enables the gov­ hood and identity." After more than a ernment to meet cash needs for ongo­ century of external rule, Belau had ing projects. The energy funds totaling regained its sovereignty and interna­ some $40 million also have been tional personality. invested. This arrangement allows These dramatic changes were made Be1au to purchase energy systems for possible by the August 1994 decision the rural states (village complexes) of the Palau Supreme Court to dismiss and, at the same time, to make pay­ one of the two suits challenging the ments in accordance with the IPSECO validity of the compact agreement. debt settlement agreement finalized in George Allen, an internationally August 1995. The agreement requires known attorney, represented the Be1au to pay $20 million over a five­ plaintiffs, Nancy Wong and others, year period to a consortium of British and Jon Hinck argued the govern­ banks. Finally, in fiscal year 1996 ment's case. The loss did not discour­ Belau will receive $5.5 million to age the women, who fired Allen and offset the potential impact of US attempted without success to file military site activities there, none of appeals, first in Belau and then with which are planned or anticipated in the US Federal Court in Honolulu. Just the near future. According to informed a week before independence day 1994, sources in Be1au, the republic's invest­ all legal challenges to the compact had ments have yielded average returns of been retired. 12 to 16 percent to date. This bodes Be1au negotiated the compact in well for the new nation's financial order to receive its trust funds, capital future. improvement funds, and energy assis­ During the period under review, tance funds during the first year of free Belau took a huge step onto the inter­ association. A trust fund advisory national scene with the achievement of board was established to oversee the sovereignty and admission to the investment of over $130 million. After United Nations. Diplomatic relations considering bids from various money were established with Australia, New managers, the board selected Merrill Zealand, Japan, the Federated States of Lynch as its consultant and the First Micronesia, Papua New Guinea, Hawaiian Bank and the Hawaiian Israel, the Republic of Korea, India, THE CONTEMPORARY PACIFIC· SPRING 1996 and, of course, the United States. Dip­ defuses situations before they become lomats from many of these countries major problems. He campaigns every have presented their credentials during day, keeping one eye on the competi­ visits to Belau. The liaison offices in tion and the other on his grass roots Koror and Washington, DC, have been supporters. By mid-1996 the political upgraded to embassies, although Presi­ scene will be heating up as ambitious dent Nakamura has yet to appoint any individuals emerge to make their bids ambassadors to these posts. The presi­ for the presidency. dent made official visits to Japan and DONALD R SHUSTER the Republic of China (Taiwan) in early 1995, and finalized an agreement with Australia that will provide Belau with a 165-ton fast patrol boat for sur­ FEDERATED STATES OF veillance of its two-hundred-mile MICRONESIA exclusive economic zone. The year 1994-95 was one of fishing The surge of national pride and ventures gone rotten. The FSM gov­ strengthening of national identity ernment had invested nearly $120 mil­ accompanying independence did little lion in fishing projects in the past five to mask some troubling issues associ­ years, borrowing heavily against future ated with the growing number of for­ payments of US subsidies under the eign workers in Belau. There are about Compact of Free Association to do so. six thousand workers from foreign Purchases have included purse seiners countries-mainly the Philippines-in for Yap and Pohnpei, and lately for Belau. Local employers often favor Chuuk as part of a $10.3 million joint these individuals over local workers venture with Westpac Corporation, because of a perception that they are but none of the ventures has even come more reliable and productive. The close to turning a profit. In his remarks workers, particularly the women, are to the FSM Congress at the opening of easily exploited. Further, Belau's a new session in August 1994, Speaker numerous "front" businesses, espe­ Jack Fritz lamented that "national cially those catering to tourists, have investments are going down the pushed many exclusively local small drain." He professed to agree with operations out of the market. This sit­ Deputy Secretary of External Affairs uation is generating some social ten­ John Mangefel, who quipped that "all sion and is likely to get worse. this talk about fish may turn out to be The record shows that the Naka­ another fish story." mura administration has realized many Ting Hong Oceanic Enterprises, a significant achievements during the Taiwanese company with interests in first half of its term in office, but it has Belau, Marshall Islands, and Solomon yet to tackle the foreign worker issue. Islands, has been the major player in The president is known as a superb the fishing industry over the past year. local politician who works hard, Ting Hong has been airfreighting fresh values loyalty, adeptly cultivates sup­ tuna to Japan for the sashimi market port from the National Congress, and several times a month. A request by POLITICAL REVIEWS· MICRONESIA 159 Ting Hong for exemption from FSM ing firm. Their final plan for educa­ gross revenue taxes, approved by Presi­ tional improvements and reforms in dent Bailey Olter, was denied by the the use of the labor force was accepted FSM Congress. In June, the Supreme by the government in May 1995. In the Court found Ting Hong guilty of four last year, the Asian Development Bank fishing violations and imposed a fine has sponsored studies on coastal of $2.2 million. Widely viewed as an resource management, agriculture, and opportunistic exploiter and repeatedly the improvement of government plan­ accused of bribing government offi­ ning. It now has a pair of consultants cials, Ting Hong has been a controver­ located in Pohnpei for the next three sial presence from the start.